HAZEL MERCANTILE LTD. Vs. COMMISSIONER OF CUSTOMS (EX.)

JUDGEMENT

(1.) IN this order we deal with 4 stay application along with 4 appeals. After hearing on the stay applications for sometime, it was decided that both the stay applications and appeals will be heard together. Accordingly both the stay applications as also the appeals are being taken up together. Brief facts of the case are that the appellants (1) and (2) are exporting Porcelain Mugs after procuring these from various manufacturers in India mainly M/s. JCPL, Mudrika Ceramic, Oasis, Ceramics. Porcelain Mugs are exported to M/s. Ransat Services Ltd. U.K. The dispute in the case is relating to the valuation of Porcelain Mugs. Appellants were exporting the said mugs under DEPB scheme which entitles them to claim DEPB benefit at the specified rates which are related to the FOB value of the goods exported. While processing 3 shipping bills, it was realized that there was huge difference between the ARE -1 value (i.e. ex -factory value) declared by the manufacturers of Porcelain Mugs and FOB value (i.e. export price) declared by the appellants. The FOB value was 4 to 5 times the ARE -1 value. In view of such huge difference, investigations were taken up. Searches were conducted at the office premise of the appellants (1) and (2). During the search, large number of incriminating documents were recovered which indicated ARE -1 value of various consignments exported in past as also FOB value, documents recovered also indicated price negotiations between the appellants and the importer in U.K. It was revealed that the appellants have accepted to add .08 pounds per pc of mug on the ARE -1 value and export at that price. It was also revealed that some of the manufacturers from whom the appellants were procuring the Porcelain mugs were also supplying the same directly to the buyer in U.K. During searches, duplicate set of invoices indicating the same number were recovered while one set of documents indicated the price which was based upon ARE -1 plus .08 pounds per pc, the other set of invoices indicating very high value ranging 400 to 500% of the other invoice value. Details given in these documents such as manufacturer's invoice, ARE -1 and appellants' export invoice, packing list, container number, etc., were all tallied. It was also found that in the export documents presented to the Customs, invoices which represents 400 to 500% value comparing to the ARE -1 were presented to the customs. Statements of various persons including Shri Nitin Kumar Didwania, Director of the appellants (1) and (2), officials of appellants (1) and (2), as well as officials of the manufacturing units were recorded. Based upon the investigation, show cause notices were issued to the appellant (1) and (2) proposing re -determination of the value of the goods based upon the ARE -1 value plus .08 pounds per pc of Percelain mugs instead of the declared value in the export documents.

(2.) AFTER receiving the reply from the appellants and hearing the appellants, the impugned order has been passed, wherein the Commissioner has rejected the export value declared for the impugned goods exported by the appellants (1) and (2) and re -determined the same on the basis of ARE -1 plus .08 pounds per pc. Further, due to misdeclaration in the value, the goods exported became liable to confiscation under Sec. 113(d) & 113(i) of the Customs Act but since the goods have already been exported and are not available for confiscation, no order for redemption of the goods was issued. However, penalty equivalent to re -determined value was imposed on the appellants (1) & (2) under Sec. 114(i) of the Customs Act. Similarly, equal amount of penalty was imposed on Shri Nitin Kumar, Director in Appellants (1) & (2). Penalty of Rs. 50 lakhs was also imposed on Shri Rajeev Verma erstwhile Export Manager of Appellants (1) & (2) under Sec. 114(i). Being aggrieved by the said order, the appellants are before us.

(3.) LD . AR for the department argued that in respect of the 14 Bills of Entry, the appellants did not produce ARE -1 or procurement invoices and had produced certain invoices of different departmental stores indicating retail price of the particular range. Based upon these documents and the fact that the department did not have any evidence to the contrary, the value was accepted. However, subsequently, in respect of 3 shipping bills, realizing that the FOB value is 4 to 5 times more than the ARE -1 value, investigations were carried out. Searches were conducted at the appellants premises and case is booked based upon the incriminating documents recovered from the appellants' own office. Ld. AR also clarified that the case is not based upon the statements but based upon the documents recovered from the appellants' own office. Statements have been recorded only to explain the documents or to support what is written in the documents. The ld. AR has contended that it is fact that the importer in U.K. had already dealt with in past with the manufacturer of Porcelain mugs from whom the appellants were procuring the same and obviously no businessman will pay 4 to 5 times the price to the appellants. Even, the documents recovered indicated that the appellants were to add .08 pounds per pc. of mugs as the value addition on their account which appears to be reasonable. Ld. AR stated that there was no reason to keep two sets of invoices and there is no explanation whatsoever from the appellants why there are two sets of invoices, one indicating the value based on ARE -1 plus .08 pounds per pc, and the other indicating 400 to 500% value. Ld. AR, also stated that both during adjudication as also before this Tribunal appellants have not questioned any of the documents or commented on any of the documents. The appellants are only contending that the goods were branded and tailor -made on behalf of the importer and would fetch higher prices. Ld. AR contended that it may be true that the branded goods fetch higher price in retail market but that is not so when such brand owner gets them manufactured or import. Here the difference in price is between ex -factory price and FOB value of the so called tailor -made/branded goods. In any case, there is no evidence brought forward by the appellants to indicate that the goods were tailor -made and had very special designs. Even if such goods were to have special designs or any such features, the manufacturer himself would increase the price and therefore, ARE -1 value would be higher. Therefore, this argument is totally baseless and misleading. Ld. AR also explained that the Jt. DGFT has not accepted the value but has kept the matter pending till the finalization of the value by the Customs and it is in pursuance of such order that the copy of the impugned order has been marked to Jt. DGFT. As far as Hon'ble Supreme Court's decision in the case of M/s. Vishal Export Overseas is concerned, ld. AR explained that in the said case, Tribunal also accepted the declared FOB value and Supreme Court only upheld the order of the Tribunal. In the said case, FOB value was accepted by the Tribunal due to lack of evidence and department had fixed the export value based upon a hypothetical basis. It was in view of the lack of evidence that the FOB value was accepted and hypothetical value arrived by Customs was rejected and this was upheld by the Supreme Court. In the present case, the case of the department is based upon the incriminating documents recovered from the appellants' premises only. The said documents are not questioned by the appellants and the basis of re -determination was those documents alone. In view of the said position, the decision of the Hon'ble Supreme Court cannot be applied in the facts and circumstances of the present case. On the contrary, the Hon'ble Supreme Court's decision in the case of Om Prakash Bhatia (supra) is applicable as both in that case as also in the present case, the issue involved is valuation of export goods. The fact that in one case the goods were being exported under drawback claim and in the present case under DEPB makes no difference. Ld. AR also stated that during arguments, ld. counsel for appellants has talked about not granting cross -examination to one Shri L. Jajodia of JCPL. Ld. AR stated that even in the appeal memorandum the appellants have not taken up this point and this shows that they were not serious about the cross -examination. What is stated by Commissioner in the impugned order is correct. In any case, all that Shri Jajodia has stated in his statement was about the goods exported by him to the same buyer M/s. Ransat, U.K. Some variation in the quality or pattern of the goods may cause some variation in the export price but not to the extent of 400 to 500% value. It is not in dispute that M/s. JCPL exported Porcelain Mugs to the same buyer in U.K. directly as also through the appellants (1) and (2). Ld. AR contended that in view of the said position, the impugned order should be upheld and appeals should be dismissed.